5 Best-Performing ETF Areas of Last Week
Key indexes of Wall Street overlooked the Evergrande-related tensions and ended the week on a positive note.
After two disastrous weeks, Wall Street was moderately upbeat last week. The S&P 500 (up 0.51%), the Dow Jones (up 0.62%) and the Nasdaq Composite (up 0.02%) and the Russell 2000 (up 0.50%) – all were in the green (read: S&P 500 ETF's Best Day Since July: 6 Winning Stocks).
Key indexes overlooked the Evergrande-related tensions and ended the week on a positive note. Notably, China real estate developer Evergrande agreed to settle interest payments on a domestic bond, while the Chinese central bank injected cash into the banking system, to eradicate global market fears of contagion from the debt-laden property developer and its default risks. Evergrande fears shook the markets lately on a potential of the Lehman-like crisis.
However, equity investors finally brushed aside uncertainty over monetary and fiscal policy and ongoing debates in Washington over the debt ceiling. Buy-the-dip strategy also helped boost equities. Cyclical sectors outperformed as the Federal Reserve stressed on the economic progress.
The Fed has also given cues of an imminent QE taper. "It’s not a surprise to me that the Fed is moving forward with the tapering," Jeff Schulze, ClearBridge chief investment strategist, told Yahoo Finance. "If you think about the three-month moving average ... we're at about 740,000 jobs created per month. That is stronger than anything we've ever seen pre-COVID,” as quoted on Yahoo Finance.
This is why bond yields jumped from 1.31% (on Sep 20) to 1.47% (on Sep 24) on Fed tightening cues. Stocks also gained on hopes of sustained economic recovery. Investors chose to invest in the corporate strength. On an even more positive note, the net worth of American households reached a fresh all-time high in the second quarter of 2021 supported by a faster-than-expected recovery of the U.S. economy from the pandemic-led devastations. On Sep 23, Fed reported that household net worth surged $5.85 trillion or 4.3% in second-quarter 2021 from the first quarter to reach $141.7 trillion.
Against this backdrop, below we highlight a few ETF areas that stood out last week.
ETFs in Focus
iPatha.B Tin Subindex TR ETN JJT – Up 8.17%
Tin prices have been hovering around a record high on supply crunch. Prices for the metal have been powered by supply disruptions in key producing countries and surging demand for electronics, where the metal is used for soldering to connect components, according to a mining.com article. The global tin market deficit is expected to increase to 12,700 tonnes in 2022 from 10,200 tonnes this year, International Tin Association (ITA) predicted in June, as quoted on mining.com.
Oil & Energy
Vaneck Unconventional Oil & Gas ETF FRAK – Up 7.30%
DWA Energy Momentum Invesco ETF PXI – Up 5.28%
Falling crude inventories, supply disruption in the Gulf of Mexico after two hurricanes and growing fuel demand are driving the oil price higher. Notably, U.S. crude stocks fell to the lowest level since October 2018. The underlying MVIS Global Unconventional Oil & Gas Index tracks the overall performance of companies involved in the exploration, development, extraction, and/or production of unconventional oil and natural gas. The fund charges 54 bps in fees.
Travel & Tourism
Etfmg Travel Tech ETF AWAY – Up 6.96%
US Global Jets ETF JETS – Up 6.77%
Defiance Hotel Airline and Cruise ETF (CRUZ) – Up 6.05%
Advisorshares Hotel ETF (BEDZ) – Up 5.69%
Sonicshares Airlines Hotels Cruise Lines ETF (TRYP) – Up 5.44%
The United States will likely relax travel restrictions for international visitors who are vaccinated against COVID-19 in November, including those from the U.K. and EU, the White House said recently, as quoted on CNBC. Foreigners visiting the United States will have to show proof of vaccination and a negative COVID-19 test taken within three days of departure. The latest White House announcement came following the peak summer travel season which indicates solid holiday travel demand.
Airlines have urged the Biden administration to lift the rules, which have upset demand for international travel. The changes will be put into effect in early November, which will aid the holiday bookings. No wonder, all tour and travel related stocks surged last week.
China Real Estate
Global X MSCI China Real Estate ETF CHIR – Up 5.73%
China’s Evergrande indicated that it has somewhat ‘resolved’ a scheduled payment of interest last week, though uncertainties still linger. China Evergrande's electric car unit cautioned on Sep 24 that a troubled future is in the cards. Chinese government has also intervened into the matter. This has led investors to buy the dip in CHIR.
Breakwave Dry Bulk Shipping ETF BDRY – Up 5.69%
The demand for shipping is high considering the improvement in global economic growth and a commodity boom from easing COVID-led restrictions. These factors are leading to very high freight rates. The space is also getting support from still-easy monetary and fiscal policies, supply-chain issues caused by the COVID-19-led lockdowns and higher demand from e-commerce companies.
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ETFMG Travel Tech ETF (AWAY): ETF Research Reports
VanEck Vectors Unconventional Oil & Gas ETF (FRAK): ETF Research Reports
U.S. Global Jets ETF (JETS): ETF Research Reports
Invesco DWA Energy Momentum ETF (PXI): ETF Research Reports
iPath Series B Bloomberg Tin Subindex Total Return ETN (JJT): ETF Research Reports
Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports
Global X MSCI China Real Estate ETF (CHIR): ETF Research Reports
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